Resolving the SME Public Procurement Conundrum

March 14, 2014

Alan Holland

It was interesting to listen to Sara Murray from Buddi on BBC 4’s flagship Today programme this morning (March 14th). Ms Murray described some of the difficulties she had in a recent procurement engagement with the MOJ. She was particularly critical of the risk aversion of the procurement professionals she was dealing with in terms of their willingness to procure from SME’s. In an article in the Telegraph on Friday last, March 8th she is quoted as saying that:

The complexity of government procurement processes in the UK, and this is specific to the UK, is not designed to let SMEs in.

Consultant Richard Johnson (ex SERCO) also spoke on Today, and agreed that Whitehall needed to be more nimble in keeping control of contracts. He also argued that “If your strongest motivation is to secure the cheapest possible price for the service you will ultimately be driven to the larger contractors.”

Francis Maude then spoke, disagreeing with Richard Johnson’s contention that if you were ' interested in price ' you were driven to the bigger providers claiming that "actually you’ll often find the reverse is the case. Often the most competitive provider can be a new dynamic innovative supplier”.

He went on to add that; “The old way of doing things [was that] the previous contracts were let in a single lot / a single contract which no company like Sara’s would have been able to even bid for. With the new approach the contract was broken up into a number of lots so that SME’s were able to bid."

What is interesting with this debate is that the inherent tensions between large contractors and SME's still exist. Up to now, a common approach in procurement, has been to aggregate, contracting with one / two suppliers on the assumption that this will drive best value. What is equally clear is that this approach is no longer ‘ fit for purpose ’ and the creation of narrower supplier bases in the guise of monopolies / oligopolies has led to an increase in opportunistic behaviour over time.

Breaking into lots as Mr Maude has been advocating, is definitely a step in the right direction, as it enables SME’s to participate in the process. However, there still has to be a willingness on the procuring bodies behalf to ensure that excessive bureaucracy does not lead to them pulling out, if the demands on them become overwhelming.

Recognizing that smaller companies can play a vital role in introducing innovation, supporting business locally, and in keeping the bigger players in check mean that moving forward SME’s should hopefully gain more business as increasing numbers of procurement professionals recognise their importance. Ensuring a vibrant supplier base helps ensure ongoing competition, and while moving beyond a single supplier will likely add to the admin burden the overall gains will typically trump this trade off.

Finally, as Ms Murray argued the lazy assumption that SME’s are more expensive is simply not accurate. With the electronic tagging exercise she had participated in she argued that her products were ‘ much better and less than half the price ’. While this debate is set to run, the arguments for winner take all/ large contractor arrangements get flimsier by the day.Alan Gleeson is the Head of Sales and Marketing at Keelvar.

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